Like every April, this one as well brought a new taxation year in the United Kingdom. This year’s tax announcements bring much good news for contractors. Primarily, there is an increase in the amount that you can earn before you pay the income tax. Hence, most people will get a tiny reduction in their taxes depending on their total income. Therefore, like every year, there are new thresholds and tax rates announced for this year. As a contractor, self-employed or a freelancer, you can have a big impact on your overall taxes. Let us check out some of the trends for this year!
The minimum wage has changed slightly for this taxation year, and it varies across different ages. For children under the age of 18, the minimum wage is £4.35 per hour while for adults who are 25 years old or more than that, the minimum wage is £8.21 per hour. Similarly, there is a change in the minimum wage for adults in the age group of 18-20 as well as 21-24 which is £6.15 and £7.70 per hour respectively. This is a big change and will affect the overall income of people in this financial year.
There is also a change in the overall personal allowance in the UK and Northern Ireland. The personal allowance is the total income that you can earn in a financial year without being taxed on it. In the taxation year 2019-20, this amount has been increased to £12,500 which is a big change from £11,850 which was the personal allowance amount in the year 2018-19. This is great news for students and small business owners who are just starting up because the threshold has increased and they might just be exempted from any kinds of taxes in this fiscal year.
If you are running a business or you are the director of a company, you need to take full responsibility of paying any kind of student loans that you might have on you. In addition to that, if you have employees with student loans, you need to take full responsibility for deducting and calculating their student loan repayments. For this financial year, the threshold for the repayment of student loans has also increased according to 2 plans. As per the first plan, the threshold has increased from £18330 to £18935, and as per the second plan, it has gone up from £25000 to £25725.
Capital Gains Tax
The taxes for capital gains exemption amount for every individual have also increased from £11700 to £12000. The gains in entrepreneurial relief have been extended from a 12-month period to a 24-month period.
There are many aspects of the corporate tax that has changed in this financial year. There are many changes in the pensions at the workplace, the annual investment allowance as well as the business rates. The corporation tax on the profits of businesses remains at 19%. However, the government does plan to reduce it to 17% in the next financial year, i.e., till 2020-21. In the case of pension at the workplace, the employees need to make a minimum contribution of 8% of their earnings. They will be auto-enrolled in the workplace pension schemes. In the last financial year, the total contribution from the employees was 2%, and the employers were 3% which made a total of 5%. However, after the changes in the current financial year, this has changed to 3% for the employers and 5% of the employees, which makes a total of 8%.
As a part of the Annual Investment Allowance (AIA), companies can claim on the expenditure of the value £1 million for fixed assets in the name of the company for things like machinery and plant. Business rates are reduced by almost a third for the companies that have a rateable value of £51,000 or less. Hence, the new taxation scheme also has some relief for new business owners and individuals who find it hard to save for their retirement.
Since it is the new financial year, why not start afresh with your savings and be more efficient with money management? DNS Accountants can be of immense help in this regard and can help you learn a thing or two about managing your finances in the best possible way. The first step towards making the right savings is to educate yourself about the latest taxation laws, and this is where DNS Accountants can be your best friend. With years of experience under our belt, we can make your accounts a thing of beauty so that you never have to worry about paying too much taxes or losing your money on irrelevant things. Get in touch with us for a quote today!